Sustained selling by foreign portfolio investors (FPI) has supressed the stock prices. Current valuations are steep and investors are finding it difficult to commit incremental money to Indian stocks on the back drop of geo-political tensions and weak earnings season. This has led to drop in cash market volumes.
Overall poor sentiment in the stock market has played on the derivative markets as well. SEBI’s measures to curb excessive trading in derivatives have caused a drop in volumes in futures and options. Going forward the volumes may go down by 20-30% due to implementation of Sebi’s six points regulatory framework. Increase in lot size and limiting weekly expires to one per exchange will dampen retail participation. Traders’ response to new stock derivative contracts will be watched out.
